Web Bytes 472

20 March 2014

The pitfalls of valuing vacant developable landRode - South Africa
The valuation of a substantial track of developable vacant land with the potential for township establishment poses special challenges to property valuers. This is so because no two such properties are identical.

Karen Scott, head of valuations at Rode & Associates, says valuers should essentially arrive at a value through synthesis of the following three methods:

(i) Comparable-sales method,
(ii) Expert-panel method, and
(iii) Residual-land-value method, also known as the developer’s method.

Although our courts tend to prefer the first approach, the obvious pitfall of this method is that truly comparable sales need to be found, and these are often as scarce as hen's teeth. Thus, even in the best case, the valuer ends up with an exceedingly small sample of ‘comparable’ sales, which would make any statistics professor’s remaining hair stand on end.Rode

Breached property lease 'can be torn up'IolProperty - South Africa
When a tenant or landlord fails to honour contractual obligations, or performs late, the innocent or aggrieved party can cancel for breach. If the tenant cancels, say for the landlord's failure to maintain the dwelling that placed the onus on the landlord to carry out repairs and maintenance, the lease is cancelled.

Landlords, their agents and legal representatives often use a calendar month's notice of termination of lease for breach. A material breach of the terms of the lease may lead to cancellation of the lease or refusal to renew it. Such a cancellation is with immediate effect for a material breach. The tenant would be in breach for paying rent late and the landlord may choose to declare the lease cancelled or to enforce the payment of the rent, or do both.IolProperty

Two scary developments for property ownersMoneyweb - South AfricaAre you trapped in the middle-income cycle?
As an investor coming in at the tail-end of a multi-decade boom in residential property, I have never really bought the idea that “your home is an asset.” While I believe there is money to be made for savvy investors – and that is probably not the majority of residential property buyers – two articles over the weekend affirmed for me that this is potentially a risky asset class.

The first was a interview with Public Service and Administration Minister Lindiwe Sisulu who said that a proposal had been put forward for the government to be the backer of 1.3 million individual mortgages for government employees.

“We [government] are the collateral,” said Sisulu in her interview with the Cape Argus.

Don’t get me wrong. I am a huge believer in the transformative power of low-income housing to move people into the middle-class. This should be an imperative for South Africa and is part of the reason I’ve been investing in the likes of RBA Holdings as a long-term punt.

My concern is more that the middle-to-upper income earners are likely to abuse the system because, much like ministers and their fancy cars, if government is guaranteed to pick up the tab then why worry what risk you take?Moneyweb